Verve's Q2 results fell short of our expectations across the board, as macroeconomic headwinds dampened organic growth more severely than we had anticipated. The sluggish top-line development cascaded down to profitability, which already carried the weight of planned front-loaded growth investments. The structurally higher gross margin held up as the bright spot, while customer metrics were solid overall. Cash flow, our key focus, was modest but reassuring given a fully drawn securitization program and a normal seasonal working-capital tie-up. Management reiterated its full-year guidance, but with H1 tracking soft, we now see a lower-end outcome as more likely, so we trim our estimates and lower our target price to SEK 15 (was SEK 20). We nonetheless reiterate our Accumulate recommendation, where we believe the sharp post-Q2 sell-off leaves the share pricing in a great deal of bad news, creating an asymmetric risk/reward where downside looks limited and even a stabilizing H2 could support a re-rating.

Organic growth disappoints, but customer metrics solid

Reported revenue of 152 MEUR (Q2'25: 106 MEUR) grew 6.5% like-for-like but fell short of both our 158 MEUR estimate and the 162 MEUR consensus. The miss was driven by softer-than-anticipated underlying demand, with organic growth of just 3.5%, well below the low-double-digit expansion we had modeled. According to the company, the advertising market proved more selective than anticipated, as macroeconomic pressures from tariffs and elevated oil prices constrained ad spend in key verticals such as travel, consumer packaged goods, and automotive. KPIs were overall solid, with net dollar expansion rate (NDER) improving to 95%, retention at 99%, and the customer base still expanding. Adjusted EBITDA of 30 MEUR was slightly below our estimate, and reported EBITDA of 21 MEUR was dragged by 9 MEUR of one-offs tied to  e.g., US-listing preparation and efficiency measures, while the like-for-like gross margin held up as the bright spot at 40.0% (Q2'25: 33.1%). Cash flow was modest, but reassuring, given the fully drawn securitization program and normal seasonality, leaving adjusted leverage at 3.3x.

Trimming estimates as the H2 bar rises

Following Q2, we lower our 2026 revenue estimate to 667 MEUR (was 681 MEUR) on softer-than-expected organic growth, and cut adjusted EBITDA to 149 MEUR (was 162 MEUR), now at the lower end of the 145-175 MEUR guidance range. Management guided for a broadly flat gross margin year-on-year in H2, which removed the seasonal Q4 uplift we had previously assumed. Below that, our adjusted EBIT falls to ~104 MEUR (was ~120 MEUR) on a higher D&A base, while we now carry ~20 MEUR of items affecting comparability for FY26 (was ~7 MEUR) as well as a higher net financials assumption, both of which weigh further on unadjusted earnings. We trim our FCFF estimate by ~12% and now expect leverage to decline to ~3.0x by year-end 2026 (was 2.7x), and within the 1.5-2.5x target range during 2027, a path underpinned by the securitization program expansion that management expects to sign within weeks.

Low expectations tilt the risk/reward upward

Verve trades at depressed absolute multiples (2026e adjusted EV/EBIT of ~6x, EV/EBITDA of ~4x, and EV/FCFF of ~9x), which are well below both its own history and comparable ad tech peers. We believe this continues to reflect the market's skepticism about the company's ability to execute, convert earnings into free cash flow, and reduce its elevated leverage. The Q2 report did not fully resolve those questions, leaving the decisive proof points increasingly concentrated in H2 and beyond. However, at the current share price level, we think a great deal of bad news is already priced in. The implied earnings- and FCFF-based multiples at our SEK 15 target sit around the lower end of our acceptable valuation ranges, which we consider warranted given the increasing execution risk, soft underlying cash conversion, and high leverage. Meanwhile, the structurally higher gross margin and improving customer metrics support the case that the underlying business is healthier than the multiples imply. With expectations this low, we see the risk/reward as increasingly asymmetric, where even a stabilizing, lower-end H2 delivery could support the stock, while any acceleration toward the mid-upper end of guidance leaves clear re-rating potential.